Competition getting tough between Uber and Lyft
SAN FRANCISCO (Reuters) – Uber Technologies Inc will continue to lose money in its home market for at least the next six months as rival Lyft Inc poses a fierce competitive challenge, Chief Executive Dara Khosrowshahi said on Thursday in his first public comments since taking the top job at Uber two months ago.
“The U.S. is very, very competitive right now between us and Lyft, so I don’t see the U.S. as being a particularly profitable market for the next six months,” said Khosrowshahi, who made the comments at the New York Times DealBook conference in New York, which was also streamed online.
A spokesman confirmed that Uber will be unprofitable overall, although some cities may break even.
Khosrowshahi was tapped to run Uber in August after leading travel-booking site Expedia Inc for 12 years and is expected to bring a less abrasive approach than his predecessor, Travis Kalanick. On Thursday, he described progress in talks with regulators in London, who in September refused to renew Uber’s operating license.
Uber has often said its heavy losses were necessary to establish itself in new markets. But the lack of profits in its home market, where it has been operating for eight years, and others such as Southeast Asia, raise questions about the company’s business model, which relies on heavily subsidizing both riders and drivers to keep prices low using the billions of dollars in venture capital the company has raised.
Khosrowshahi’s comments are also a testament to Lyft’s growth. The smaller ride service, which started in 2012 and only operates in the United States, has expanded to more than 350 cities across 41 states this year and last month raised $1 billion in a financing round led by Alphabet Inc.
For a brief period last year, Uber was profitable in the United States and Canada, the company said.
Khosrowshahi outlined the challenges in Southeast Asia, where Uber has had to spend heavily to compete with local ride services Ola and Grab.
“The economics of that market are not what we want them to be,” Khosrowshahi said. “I think it’s over-capitalized at this point. We’re going in, and we’re leaning forward. But I‘m not optimistic that market is going to be profitable anytime soon.”
But he dismissed the prospect of further consolidation similar to the merger deals Uber struck with competitors in China and Russia.
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In Britain and Brazil, prospects are brightening. Khosrowshahi said that he held productive talks with London’s regulators, who have deemed Uber “unfit” to run a taxi service in the city, where Uber has some 40,000 drivers.
“We were guilty of not communicating,” he said. “I think we were generally immature in how we deal and dealt with regulators.”
He added that Uber staff was working to accommodate the “perfectly reasonable asks” from Transport for London, the taxi regulating body.
Khosrowshahi was also upbeat about Brazil, where Uber has joined forces with other ride-services companies to block regulations. The Senate last week voted to scrap parts of a bill, now to be taken up by the House, that would have effectively turned the companies into regular taxi services.
